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  • Dr Thorsk Westphal


During the summer break, news around the real estate market died down a little, but that doesn't mean the market has died. In fact, across Wanaka, we've seen an increase in listings, indicating that some home owners decided to realise property gains before the market turns. With an -11% drop in median houses prices in Wanaka in December, they may have been right, though whether this is the start of a downturn or a seasonal blip is now the key question. Renowned economist Tony Alexander neatly summarised the forces for a continuing price growth vs those potentially driving a decline as follows:

Drivers of further Price GROWTH:

  • Construction costs - increasing due to labour and supply constraints.

  • Inflation - making property a 'safe haven' and servicing mortgages 'cheaper'.

  • Perceived job security - even if artificially propped up through government spending.

  • Perceived wealth - households feeling wealthy, even if their $ is tied up in their home.

  • Migration - from metropolitan centres to the countryside (incl Wanaka)

Drivers of Price DECLINE:

  • Interest rates -increases in mortgages, making high prices less affordable; in term deposit rates, making alternative investments to property safer and more lucrative.

  • Fewer expat returns - as life goes back to normal abroad, expat Kiwis stay away.

  • Housing supply - increasing given an easing of property development restrictions.

  • Borders re-opening = resumption of travel = spare money being spent elsewhere

  • Tightened bank lending - from higher LVRs (loan-to-value ratio) and lower DTI (debt to income ratio), to banks examining every detail of potential borrower's lifestyles

At the end of the day, we all know that a party can't last forever, so an eventual decline would be logical. The main counterargument is history ... none of the past forecasts of sustained declines ever materialised!

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